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RA No 11976: Act Introducing Administrative Tax Reforms

Republic Act No. 11976, also known as the Ease of Paying Taxes Act, is now effective as of January 22nd, 2024. This Act aims to improve efficiency in the tax administration system by providing solutions that will encourage taxpayers into complying with their tax obligations. Here are the highlights so that you can fully inform yourself on the improvements made to tax administration.

  • Taxpayers are now classified into four different categories based on their gross sales. This is to ensure responsive tax administration.
    • Micro taxpayers have gross sales of less than P3 million; 
    • small taxpayers have gross sales of P3 million to less than P20 million; 
    • medium taxpayers have gross sales of P20 million to less than one P1 billion; and
    • large taxpayers have gross sales of over P1 billion.
  • Business taxpayers will no longer need to pay the Annual Registration Fee of P500. Consequently, these taxpayers will no longer have to file BIR form No. 0605.
  • Overseas Contract Workers or Overseas Filipino Workers no longer need to file an income tax return. 
  • Taxpayers may now file and pay internal revenue taxes either electronically or manually, and to any revenue district offices, authorized agent banks, or authorized tax software provider. This is to streamline the filing of returns and payment of taxes. It also removed the 25% surcharge on wrong-venue filings.
  • Married individuals who do not derive income purely from compensation must file a return for the taxable year to include the income of both spouses. However, if it is impracticable for the spouses to file one return, each spouse may file a separate return of income. The Bureau of Internal Revenue will then consolidate these returns.
  • The obligation to deduct and withhold the tax arises at the time the income has become payable.
  • VAT refund claims are divided into three categories: low-risk, medium-risk, and high-risk. Medium-risk and high-risk VAT refund claims are subject to audit and verification processes.
  • Refund of erroneous or illegal tax collection must be acted upon within 180 days.
  • Mandatory issuance of an invoice for a sale or transfer of goods or services has increased from P100 to P500.
  • Gross sales will now be the basis for calculating VAT on the sale of services. 
  • Micro and small taxpayers will now face reduced penalties for any violations of the Tax Code, such as surcharges, interests, etc.
  • Mandates the BIR to create digitized end-to-end solutions for taxpayers. Such solutions now include integrated and automated systems for basic tax services, and electronic and online systems for data and information exchange between offices and departments.

The implementing rules and regulations of this Act will be released within 90 days from effectivity of the law, so we should be able to review them before April 21st, 2024.

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